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Now compare the formations shown in
Figures 3-14 and 3-15. Each illustrates the natural law of the
inwardly directed Golden Spiral and is governed by the Fibonacci
ratio. Each wave relates to the previous wave by .618. In fact, the
distances in terms of the Dow points themselves reflect Fibonacci
mathematics. In Figure 3-14, showing the 1930-1942 sequence, the
market swings cover approximately 260, 160, 100, 60, and 38 points
respectively, closely resembling the declining list of Fibonacci
ratios: 2.618, 1.618, 1.00, .618 and .382.
Figure 3-14
Figure 3-15
Starting with wave X in the 1977 upward
correction shown in Figure 3-15, the swings are almost exactly 55
points (wave X), 34 points (waves A through C), 21 points (wave d), 13
points (wave a of e) and 8 points (wave b of e), the Fibonacci
sequence itself. The total net gain from beginning to end is 13
points, and the apex of the triangle lies exactly on the level of the
correction's beginning at 930, which is also the level of the peak of
the subsequent reflex rally in June. Whether one takes the actual
number of points in the waves as coincidence or part of the design,
one can be certain that the precision manifest in the constant .618
ratio between each successive wave is not coincidence. Lessons 20
through 25 and 30 will elaborate substantially on the appearance of
the Fibonacci ratio in market patterns.
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